279DThe ring fence amount

AR is the total amount of any ring fence profits that form part of the augmented profits of the accounting period,

NR is the total amount of any ring fence profits that form part of the taxable total profits of the accounting period, and

A is the amount of the augmented profits of the accounting period.

The lower limit and the upper limit

279EThe lower limit and the upper limit

(1)This section gives the meaning in this Chapter of “the lower limit” and “the upper limit” in relation to an accounting period of a company (“A”).

(2)If no company is a related 51% group company of A in the accounting period—

(a)the lower limit is £300,000, and

(b)the upper limit is £1,500,000.

(3)If one or more companies are related 51% group companies of A in the accounting period—

(a)the lower limit is—

and

(b)the upper limit is—

where N is the number of those related 51% group companies.

(4)For an accounting period of less than 12 months the lower limit and the upper limit are proportionately reduced.

Related 51% group companies

279F“Related 51% group company”

(1)For the purposes of this Chapter a company (“B”) is a related 51% group company of another company (“A”) in an accounting period if for any part of the accounting period—

(a)A is a 51% subsidiary of B,

(b)B is a 51% subsidiary of A, or

(c)both A and B are 51% subsidiaries of the same company.

(2)The rule in subsection (1) applies to each of two or more related 51% group companies even if they are related 51% group companies for different parts of the accounting period.

(3)But a related 51% group company is ignored for the purposes of section 279E if—

(a)it has not carried on a trade or business at any time in the accounting period, or

(b)it was a related 51% group company for part only of the accounting period and has not carried on a trade or business at any time in that part of the accounting period.

(4)Subsection (3) is subject to subsections (5) to (9).

(5)Subsection (6) applies if a company carries on a business of making investments in an accounting period and throughout the period the company—

(a)carries on no trade,

(b)has one or more 51% subsidiaries, and

(c)is a passive company.

(6)The company is treated for the purposes of subsection (3) as not carrying on a business at any time in the accounting period.

(7)A company is a passive company throughout an accounting period only if the following requirements are met—

(a)it has no assets in that period, other than shares in companies which are its 51% subsidiaries,

(b)no income arises to it in that period other than dividends,

(c)if income arises to it in that period in the form of dividends—

(i)the redistribution condition is met (see subsection (8)), and

(ii)the dividends are franked investment income received by it,

(d)no chargeable gains accrue to it in that period,

(e)no expenses of management of the business mentioned in subsection (5) are referable to that period, and

(f)no qualifying charitable donations are deductible from the company’s total profits of that period.

(8)The redistribution condition is that—

(a)the company pays dividends to one or more of its shareholders in the accounting period, and

(b)the total amount paid in the form of those dividends is at least equal to the amount of the income arising to the company in the form of dividends in that period.

(9)If income arises to a company in an accounting period in the form of a dividend and the requirement in subsection (7)(c) is met in respect of the income—

(a)neither the dividend nor any asset representing it is treated as an asset of the company in that accounting period for the purposes of subsection (7)(a), and

(b)no right of the company to receive the dividend is treated as an asset of the company for the purposes of subsection (7)(a) in that period or any earlier accounting period.

Augmented profits

279G“Augmented profits”

(1)For the purposes of this Chapter a company’s augmented profits of an accounting period are—

(a)the company’s adjusted taxable total profits of that period, plus

(b)any franked investment income received by the company that is not excluded by subsection (3).

(2)A company’s “adjusted taxable total profits” of a period are what would have been the company’s taxable total profits of the period in the absence of sections 1(2A), 2B and 8(4A) of TCGA 1992 and section 2(2A) of CTA 2009 (certain gains on relevant high value disposals by companies etc chargeable to capital gains tax not corporation tax).

(3)This subsection excludes any franked investment income which the company (“the receiving company”) receives from a company which is—

(a)a 51% subsidiary of—

(i)the receiving company, or

(ii)a company of which the receiving company is a 51% subsidiary, or

(b)a trading company or relevant holding company that is a quasi-subsidiary of the receiving company.

(4)For the purposes of subsection (3)(b) a company is a quasi-subsidiary of the receiving company if—

(a)it is owned by a consortium of which the receiving company is a member,

(b)it is not a 75% subsidiary of any company, and

(c)no arrangements of any kind (whether in writing or not) exist by virtue of which it could become a 75% subsidiary of any company.

279HInterpretation of section 279G(3) and (4)

(1)For the purposes of section 279G(3)(a), a company (“A”) is a 51% subsidiary of another company (“B”) only at times when—

(a)B would be beneficially entitled to more than 50% of any profits available for distribution to equity holders of A, and

(b)B would be beneficially entitled to more than 50% of any assets of A available for distribution to its equity holders on a winding up.

(2)The requirement in subsection (1) is in addition to the requirements of section 1154(2) (meaning of 51% subsidiary).

(3)In determining for the purposes of section 279G(3)(a) whether or not a company is a 51% subsidiary of another company (“C”), C is treated as not being the owner of share capital if—

(a)it owns the share capital indirectly,

(b)the share capital is owned directly by a company (“D”), and

(c)a profit on the sale of the shares would be a trading receipt for D.

(4)In section 279G(3)(b) and this section—

“trading company” means a company whose business consists wholly or mainly of carrying on a trade or trades, and

“relevant holding company” means a company whose business consists wholly or mainly of holding shares in or securities of trading companies that are its 90% subsidiaries.

(5)For the purposes of section 279G(4), a company is owned by a consortium if at least 75% of the company’s ordinary share capital is beneficially owned by two or more companies each of which—

(a)beneficially owns at least 5% of that capital,

(b)would be beneficially entitled to at least 5% of any profits available for distribution to equity holders of the company, and

(c)would be beneficially entitled to at least 5% of any asset of the company available for distribution to its equity holders on a winding up.

(6)The companies meeting those conditions are called the members of the consortium.

(7)Chapter 6 of Part 5 (equity holders and profits or assets available for distribution) applies for the purposes of subsections (1) and (5) as it applies for the purposes of section 151(4)(a) and (b).”

Finance Act 2000

“(a)any reduction under Chapter 3A of Part 8 of CTA 2010 (marginal relief for companies with small ring fence profits), or”.

Capital Allowances Act 2001

8In section 99 of CAA 2001 (long-life assets: the monetary limit)—

(a)in subsection (4)—

(i)for “If, in a chargeable period, a company has one or more associated companies” substitute “In the case of a company (“C”), if, in a chargeable period, one or more companies are related 51% group companies of C”, and

9In Part 2 of Schedule 1 to that Act (defined expressions), at the appropriate place insert—

“related 51% group company

section 279F of CTA 2010 (as applied by 1119 of that Act).”

Corporation Tax Act 2009

10In section 104N of CTA 2009 (payment of R&D expenditure credit) in subsection (3), in the definition of “Amount A”, in paragraph (b), after “main rate” insert “(or, in the case of ring fence profits, the main ring fence profits rate)”.

11In section 1114 of that Act (calculation of total R&D aid for the purposes of the cap), after “aid is calculated” insert “(or, in the case of a ring fence trade (within the meaning of section 277 of CTA 2010) the main ring fence profits rate at that time)”.

12In Schedule 4 to that Act (index of defined expressions), at the appropriate place, insert—

“main ring fence profits rate

section 279A(4) (as applied by 1119 of CTA 2010)”.

Corporation Tax Act 2010

13(1)Chapter 3 of Part 8A of CTA 2010 (profits arising from the exploitation of patents etc: relevant IP profits) is amended as follows.

(4)In section 627 (companies in liquidation etc: meaning of “rate of corporation tax” in case of companies with small profits)—

(a)for subsections (1) and (2) substitute—

“(1)This section applies if corporation tax is chargeable on ring fence profits of a company for a financial year.

(2)References in this Chapter to the “main rate of corporation tax”, so far as relating to those profits, are to be taken—

(a)if corporation tax is to be charged on those profits at the main ring fence profits rate, as references to that rate;

(b)if corporation tax is to be charged on those profits at the small ring fence profits rate, as references to that rate;

(c)if corporation tax on those profits is to be reduced by reference to the marginal relief fraction within the meaning of Chapter 3A of Part 8 (see sections 279B and 279C), as including references to the marginal relief fraction (and with references to a rate being “fixed” or “proposed” read accordingly as references to the marginal relief fraction concerned being fixed or proposed).”

(b)accordingly, in the heading for the section, for “small profits” substitute “ring fence profits”.

PART 3Commencement and transitional provision

21(1)The amendments made by paragraphs 8, 9 and 13 have effect in relation to accounting periods beginning on or after 1 April 2015.

(2)Accordingly—

(a)despite the repeal of Part 3 of CTA 2010 by paragraph 4 of this Schedule, sections 25 to 30 of that Act (interpretation of references to associated companies) continue to apply for the purposes of section 99 of CAA 2001, and sections 357CL and 357CM of CTA 2010, in relation to accounting periods beginning before but ending on or after 1 April 2015, and

(b)in relation to the application of sections 25 to 30 of CTA 2010 for those purposes, paragraph 22(2) of this Schedule is to be ignored.

22(1)The other amendments made by this Schedule have effect for the financial year 2015 and subsequent financial years.

(2)In the case of an accounting period (a “straddling period”)—

(a)beginning before 1 April 2015, and

(b)ending on or after that date,

the repealed small profit provisions and the new ring fence small profit provisions apply as if the different parts of the straddling period falling in the different financial years were separate accounting periods.

Options/Help

Print Options

Print The Whole Act

Print This Schedule only

You have chosen to open The Whole Act

The Whole Act you have selected contains over 200 provisions and might take some time to download. You may also experience some issues with your browser, such as an alert box that a script is taking a long time to run.

You have chosen to open The Whole Act as a PDF

You have chosen to open the Whole Act

The Whole Act you have selected contains over 200 provisions and might take some time to download. You may also experience some issues with your browser, such as an alert box that a script is taking a long time to run.

You have chosen to open the Whole Act without Schedules

The Whole Act without Schedules you have selected contains over 200 provisions and might take some time to download. You may also experience some issues with your browser, such as an alert box that a script is taking a long time to run.

You have chosen to open Schedules only

The Schedules you have selected contains over 200 provisions and might take some time to download. You may also experience some issues with your browser, such as an alert box that a script is taking a long time to run.

Legislation is available in different versions:

Latest Available (revised):The latest available updated version of the legislation incorporating changes made by subsequent legislation and applied by our editorial team. Changes we have not yet applied to the text, can be found in the ‘Changes to Legislation’ area.

Original (As Enacted or Made):The original version of the legislation as it stood when it was enacted or made. No changes have been applied to the text.

See additional information alongside the content

Show Explanatory Notes for Sections: Displays relevant parts of the explanatory notes interweaved within the legislation content.

Opening Options

Different options to open legislation in order to view more content on screen at once

Explanatory Notes

Text created by the government department responsible for the subject matter of the Act to explain what the Act sets out to achieve and to make the Act accessible to readers who are not legally qualified. Explanatory Notes were introduced in 1999 and accompany all Public Acts except Appropriation, Consolidated Fund, Finance and Consolidation Acts.

More Resources

Access essential accompanying documents and information for this legislation item from this tab. Dependent on the legislation item being viewed this may include:

the original print PDF of the as enacted version that was used for the print copy

lists of changes made by and/or affecting this legislation item

confers power and blanket amendment details

all formats of all associated documents

correction slips

links to related legislation and further information resources

More Resources

Use this menu to access essential accompanying documents and information for this legislation item. Dependent on the legislation item being viewed this may include:

the original print PDF of the as enacted version that was used for the print copy